Interest only mortgage criteria

Enable independent Financial Advisors are always available to try and help you with your mortgage. Unfortunately Santander has further tightened its interest-only criteria and will no longer accept pensions, the sale of a second property, bonuses or cash savings as repayment vehicles. This new move will be effective from March 28, and it comes a month after Santander cut its maximum loan-to-value for interest-only lending from 75 per cent to 50 per cent. 

So from the end of March, Santander will only accept the sale of the main residence or investments including endowments, stocks and shares Isas, investment bonds or unit trusts as repayment vehicles.  However, the lender will not consider future growth projections for these investment vehicles and they must be at least equal to the value of the loan. Santander will also apply a buffer of £100k between the current property value and the total loan required.

The news follows NatWest Intermediaries Solutions’ decision to suspend its interest-only lending temporarily. Recently, both the Nationwide and Coventry Building Societies decided to cut their maximum LTV for interest-only lending from 75 per cent to 50 per cent.

It was in February, Santander cut it’s maximum LTV on interest-only to 50 per cent from in February.
But a Santander spokeswoman said: “We constantly review our lending policy to ensure that we are lending responsibly. We believe these changes are prudent in today’s challenging economic environment and follow recent competitor changes in this area.”

The other two simple ways…to get financial advice...

Individuals who give personal recommendations; where an individual is involved who provides personal recommendations on retail investment products directly over the telephone or face-to-face.

The individual must meet the Training and Competence (TC) standards of a retail investment adviser.
Post-retail distribution review (RDR), the individual will need to meet all the new professionalism requirements, including having QCF Level 4 qualifications, completing a minimum of 35 hours of continued professional development per annum and holding a Statement of Professional Standing.
They must now, and after the RDR rules are implemented, behave ethically, including adherence to the ethical requirements set out in APER12, which they are subject to as an approved person.

Individuals who do not give personal recommendations can provided some support and information to clients, but must not stray into regulated advice, meaning no personal recommendations. The individual must avoid making any judgement on the suitability of one or more products.

The firm must ensure there are appropriate systems and controls in place to prevent the individual from straying into regulated advice or influencing the recommendations provided by the process.
As long as these requirements are met, the individual does not need to have any minimum qualifications or meet any TC standards. This is up to the firm providing the service.

Enable IFA’s of Bishops Stortford believe that to make sure you have the right investment products for you they need to be discussed over the phone or face to face.

Simplified advice is not that simple...

The Financial Services Authority is set to provide final guidance on simplified advice this week. Last September, the regulator published a guidance consultation outlining its definition of simplified advice, it recommended 3 possible ways.

The first was advice provided through a fully automated advice system where the customer would not at any stage in the process have the opportunity of discussion with an employee. The design, testing and review of the operation of such a system could prove more complex than the design of procedures to provide advice to customers face-to-face, or over the telephone. Given the purpose of the system is to provide advice on investments a fully qualified retail investment adviser would need to be involved in the design process from the beginning  anyway  to confirm that the system was fit for purpose before it entered into use.

The first to explore simplified advice were Aviva, it developed a prototype online model based on decision trees, but has now opted to focus on execution-only services. Paul Yates, strategy and product development director at technology provider Avelo, said simplified advice was already "dead". "There were too many checks and it wasn't really simplified enough. The key concerns around simplified advice seem to be that. "They're asking people to take too much risk." Independent Financial Advisors Enable of Bishop’s Stortford believe people are vital to getting simple clear financial advice.

Clamping down on stamp duty

The Chancellor made for higher taxes on some residential property  - starting on Thursday, the stamp duty paid on UK properties sold for more than £2m rose to 7% from 5% – from £100,000 to £140,000 – the use of schemes to avoid SDLT on residential property had grown, partly because of ineffective enforcement of the rules by HMRC. HMRC has now significantly stepped up its compliance work, but it was still possible to avoid SDLT on future sales by buying a property into a company. Levying duty on company sales was harder to enforce, as there was no easy way to track share sales, but some other countries manage to do so and we will now.

Lots of people had argued that council tax was the way to go the UK has about 27 million homes, but only 154,000 fall into the top band for council tax, with a further 920,000 in the next band, there was scope for the Chancellor to raise money by increasing council tax charged in the top two bands.

A house in the top band is worth at least £1.2 million in London (where one third are located) and at least £700,000 throughout England. The top band house in Scotland is worth at least £550,000, but just £420,000 in Wales.

Enable know that property is a vital part of most portfolios our IFA’s like to help property owners to stay abreast of any change of rules.

Pensions in the budget?

Given that it was a well publicised maybe even over publicised budget there was no surprise that the Chancellor did little to interfere with pensions as expected. At Enable Independent Financial Advisors of Bishop’s Stortford we were keen to consider any changes to pensions.  It seemed unlikely that there would be a withdrawal of higher rate relief for pension contributions –  the Chancellor would have found it hard to respond to calls to cut pension tax relief, not least because the current system was only put in place in April 2011.

Withdrawing higher rate relief would be much more complex than it might at first appear. The way in which Defined Benefit schemes work could mean employees in such schemes could end up with a big pension and low earnings. Some public sector schemes aren’t funded, so levying a charge which is then borne by taxpayers raises no money at all. There’s also a problem with Defined Contribution schemes. Cutting tax relief could mean many put in less money. However, many schemes operate on a matched contribution basis, cutting an employee’s contributions would also cut the employer contribution. Another option being floated would be a cut in the amount that could be put into a pension scheme each year; currently this is £50,000. If you have cash that you might be considering putting into your pension Enable’s Independent Financial Advisors would be able to help you consider your options..

Commercial Property Investments

Commercial property is traditionally core to many individual financial portfolios. So it could be good news that the lack of grade A space in the industrial and distribution market has become so acute across the UK that rents for prime space have risen for the first time in three years according to the latest research by Lambert Smith Hampton.

National Industrial and Distribution Market 2012 analysed activity across 59 locations in 11 regional UK centres during 2011. Across the locations recorded in LSH’s research, prime rents increased in 27 per cent of locations, with a further 39 per cent of the locations seeing prime rents stabilise.

In the East of England, availability was recorded as the lowest across the UK. In Essex, where Chelmsford, Basildon and Thurrock represent the county’s most dominant industrial markets, the supply of space is no less of a challenge with 5.7 per cent of total stock currently on the market.

Demand in Cambridge and the surrounding area has remained stable throughout the year resulting in a total take-up of 529,921 sq ft in 2011.The majority of demand has been focused on units less than 5,000 sq ft which accounted for 68 per cent of overall activity.

The largest transaction in 2011 was the letting of Titan, Space Ten, Papworth, which saw Ultra Electronics take the 37,533 sq ft unit. The number of requirements for larger good quality space has remained stable, but due to the lack of new development, demand outstrips supply. Enable’s IFA’s can talk you through your commercial property investment options.

Bond basics

With much talk of Eurobonds it’s been hard not to know more about them than you might want to but if you are still not sure Enable’s IFA’s can take you through the basics. Governments borrow money by selling securities known as bonds to investors. In return for the investor's cash, the government promises to pay a fixed rate of interest over a specific period - say 4% every year for 10 years. At the end of the period, the investor is repaid the cash they originally paid, cancelling that particular bit of government debt. Government bonds have traditionally been seen as ultra-safe long-term investments and are held by pension funds, insurance companies and banks, as well as private investors. They are a vital way for countries to raise funds.

Once a bond has been issued - and the government has the cash - the investor can hold it and collect the interest every year until it is repayable. But investors can also sell the bond on the financial markets. The price of the bond will fluctuate as the outlook for interest rates changes. So, for example, if the markets think that interest rates are going to rise sharply, then the value of a bond paying a fixed rate of 4% for the next 10 years will fall. Bond prices will also fall if investors think that there is a risk of the government that issued the bond not being able to make the annual interest payment or repay it in full on maturity . The key thing to remember is that bad news drives down bond prices, which pushes up bond yields.

ISAs futures and past

Independent Financial Advisors Enable of Bishop’s Stortford want to remind you to take up your individual ISA allowance before the end of the financial year if you can, and to remember that the new Individual Savings Account (ISA) allowance for the 2012/13 tax year will be £11,280. The new ISA allowance, will become available from 6th April 2012, and is £600 higher than the current limit of £10,680 for 2011/12.

Remember you can invest up to £5,640 into a cash ISA with the remainder up to the total allowance of £11,280 available to invest in an investment ISA. Enable know that ISAs are core part of financial portfolios and are able to make sure you maximise your tax efficiency by saving in them.

Remember the Mini and Maxi? In the past, ISA rules were unnecessarily complicated, making savers fret about whether to go 'Mini' or 'Maxi'. Thankfully since the 2008/09 tax year, this became history. Yet anyone who had savings in either of these should be aware of what happened when the terms were dropped. Did you have Mini ISAs? These were places to hold Cash or Shares separately from each other. If you had a 'Mini Cash ISA', this has now converted into a 'Cash ISA'. If you had a 'Mini Shares ISA', this is now labelled a 'Stocks and Shares ISA'. With Maxi ISAs, the two types of investments were bundled together, and bought from the same provider. Now Maxi ISAs have been abandoned, the cash element automatically became a 'Cash ISA' and the shares element evolves into a 'Stocks and Shares ISA'.

Enable can help you sort out your ISA s.

Warning against early release pension offers

Income Withdrawal, also sometimes referred to as income drawdown is a means by which a pension fund can provide tax-free cash and, if required, a regular retirement income.  Income withdrawal / income drawdown has become the preferred choice for people with pension funds greater than £50,000 who are ready to take the benefits from their pensions. But it is always bust to consult experienced Independent Financial Advisors like Enable of Bishop’s Stortford when you are thinking of drawing cash from your pension.

We at Enable urge caution and have noted that the Pensions Regulator, FSA and HMRC have recently detected an increase in schemes with pension offers that claim to be able to provide loans or release tax-free cash from people’s pension pots before they reach age 55.  Apparently known transferred funds amounted to nearly £200m by the end of 2011. Consumers have been warned to steer clear of such schemes and not to be taken in by website promotions, cold-calls or adverts encouraging them to transfer their existing occupational or private pension to a new arrangement in order to access a cash payment or loan.

These schemes usually work by transferring some of the member’s pension fund into highly risky or opaque investment structures, frequently based overseas - with no guarantee that members will get their money back if something goes wrong. By accessing pension savings earlier than the law permits, individuals are likely to be poorer in retirement – and can face substantial tax charges.

Remember ISA transfer should be faster than it used to be…..

In 2010 after a 90-day investigation following a super-complaint from Consumer Focus about the cash ISA market , the OFT secured agreement from the industry to: publish clearly the interest rates on the face of cash ISA statements - around 15 per cent of customers currently receive statements that include their interest rate, but from early 2012 all statements will include this information, and they agreed to revise industry guidelines on how long cash ISA transfers should take: down from 23 to 15 working days – which came into effect from 31 December 2010.

Clive Maxwell, the OFT's Senior Director for Services, said: 'This is an important market for the 17.5 million consumers with £143 billion of savings in cash ISAs, and also for the wider economy since those savings support lending to many households and businesses. Our work over the past 90 days has revealed that, whilst there is often strong competition between providers in this market to win new savings, the transfer of cash ISAs is taking too long and there is not enough transparency over interest rates. The voluntary changes announced today will give consumers a fairer deal and drive stronger competition. We are grateful to Consumer Focus for bringing these issues to our attention.'

Enable of Bishop’s Stortford can help with your ISA contributions and ISA transfers,  as Independent Financial Advisors experience tells us that sorting out ISA contributions and transfers  help you maximise your savings.

Switching ISA’s could be easier than you might think...

The other thing about ISA’s it that there's nothing stopping you switching provider for cash or shares ISAs; in fact it can be a good idea to make sure you continually get a top rate particularly important for cash ISAs. Yet it isn't like switching a standard savings account; transferring an ISA is a technical process.

Keeping on top of your ISA contributions and keeping them in the best accounts as part of your financial portfolio is something expert IFA’s like Enable of Bishops’ Stortford are happy to do for you. But there is one  golden rule for ISA transfers rule, never, ever, ever, ever withdraw money from a cash ISA in a transfer process you'll immediately lose all the tax benefits.

It is vital that you speak to the new provider and fill out a transfer form. This will usually include a note you can send to your existing ISA company. Your new company should then sort it all out, including moving the money over for you, keeping your tax benefits in tact. If you want to, transfer a shares ISA it may be necessary to pay another initial charge.

That's the key thing to remember, but when transferring ISAs what you can do depends on what type of ISA you want to transfer.  For past years' Cash ISAs. You may move ALL of this to another Cash ISA or into a Shares ISA, or SPLIT it between more than one Cash or Shares ISA. Past years' Shares ISAs. You may move ALL of this to another Shares ISA, or SPLIT it between more than one Shares ISA. You may not move any of it into Cash ISAs. Not all ISA providers however will accept transfers of previous years' allowances.

Money is not necessarily tied up in an ISA

As experienced independent financial advisors  at Enable in Bishop’s Stortford we have often come across the question as to whether money is tied up indefinitely in an ISA.  It is a common mistake  to think an ISA needs to be held for a set length of time in order to reap the tax-free benefits. What you need to be clear about are the rules of the individual product allow it (there's loads that do), you can have full, instant access to your money without losing the tax benefits on the rest of your savings in the wrapper.

However, once the money's withdrawn, it can't be returned. A few examples should help clarify this:
Situation: Mr. Rich Devil invests £10,680 in a shares ISA at the beginning of the tax year.
Options: He may sell the whole investment, or part of it, at any time without losing the tax benefits, but no more may be bought inside that year's ISA wrapper.

Situation: Ms. Irma Indecisive invests £2,000 in a cash ISA at the start of the tax year
Options: She may save a further £3,340 in the cash ISA, or £8,680 in a shares ISA (or a mix of the two) before the end of the tax year.

Situation: Irma then decides she needs to withdraw £1,000 of this cash
Options: There's no problem withdrawing the money; for the time the £1,000 was in the ISA the interest it earned wasn't taxed. However the fact she has withdrawn the cash doesn't increase her allowance at all - she can still only put £3,340 more in the cash ISA, or £8,680 in the shares ISA.

Make sure you use your ISA allowance

Experienced independent financial advisors Enable of Bishop’s Stortford would always encourage people to take up their ISA allowances as the first step to saving. Just like normal savings accounts there's a variety of cash ISAs available, such as instant access, fixed rate, and accounts with base rate guarantees.  IFA’s like Enable are happy to talk you through your ISA options.

For stocks and shares ISAs there are also a variety of accounts to look at, indeed share based investments in various forms are even ISA-able i.e shares in individual companies may be placed inside what's called a self-select ISA, these are usually managed by stockbrokers.

However a more common use of the shares allowance is for collective investment vehicles like unit or investment trusts. These are pooled investments where a fund manager picks a selection of shares based on geographic or sector criteria and the value of the investment depends on the collective performance of the shares picked. 

The good thing about placing these investments inside an ISA wrapper is that it provides two tax advantages. First any profits made from share price increases aren't eligible for capital gains tax and second it enables all the tax on bonds to be reclaimed. Enable of Bishop’s Stortford can offer experienced Independent financial Advice on your ISA’s.

The Big thing about ISA’s

The main thing about ISA savings or investments is that they must be made by 5 April, the end of the tax year. If you do not use it you loose it, any unused allowances do not rollover to the next year they are simply lost for good.  At Enable of Bishop’s Stortford our experienced IFA’s know that  for any saver the first place for any savings is usually an ISA, as after the tax year ends, any savings or investments stay within the tax-free ISA wrapper for the future, where they'll continue to earn interest.

Many savers and investors follow this process and it means that it's possible to have substantial amounts invested within ISA wrappers; £7,000 per year from 1999 to 2008, £7,200 per year until 2010, £10,200 for 2010/11 and £10,680 in 2011/12 then rising by inflation each year after that, plus the gains (interest or investment returns) made in each year.

By using a standard instant access savings account the basic-rate taxpayers have to give 20% of the interest earned straight to the Government. For higher-rate taxpayers this leaps to 40%, and for 'additional rate' taxpayers it is 50%.

Cash ISAs are simply savings accounts where the interest isn't taxed, meaning it's incredibly rare for a normal savings account to pay more interest. Enable of Bishop’s Stortford’s IFA’s can help you make the most of this important tax efficient way of saving.

Free Kindle and £50 Amazon voucher give away...

 We are giving away 3 Kindles and £50 vouchers to three lucky winners of our Facebook competition, just LIKE and share our page to enter. T's and C's do apply, please see below:

1.Closing date for receipt of all entries is the 18th of June 2012. 2. All entrants must ‘like’ and Share Enable Independents Facebook page/post in order to enter the competition, just tell us about what financial information you are interested in 3. The competition is open to UK residents over the age of 18, or if under the age of 18 they must have parental consent, all entrants must have a permanent UK address, except employees of Enable, their families or anyone directly connected with the prize draw. 4. Entries that are altered, illegible or not in accordance with the rules of entry will be disqualified. 5. There will be three overall winners of the 3 Kindles and 3 x £50 Amazon Vouchers 6. The prize consists of 3 Kindles and 3 Amazon Vouchers for 3 winners.  7. The prize is non-transferable. The judge’s decision is final and no correspondence will be entered into. No cash alternative will be offered. 8. The winners will be notified by Facebook on 19^th April 2012. The winner must be willing to have their name and address published and may be required to take part in any post-event publicity. 9. The name of the winner will be made available on www.facebook.com/enableflp and www.enableflp.co.uk 10. Personal data supplied by the competition entrant may be used by Enable Independent or passed to Enable. Entry to the competition is deemed acceptance of these rules.